“Illegal kickbacks distort markets and can inflate the financial burden of homeownership for consumers,” CFPB Director Richard Cordray said. “We believe these mortgage insurance companies funneled millions of dollars to mortgage lenders for well over a decade. The orders announced today put an end to these types of arrangements and require these insurers to pay more than $15 million in penalties for violating the law.”
The CFPB said that mortgage insurers named in the enforcement actions, including Genworth Mortgage Insurance Corp., United Guaranty Corp., Radian Guaranty Inc. and Mortgage Guaranty Insurance Corp., allegedly provided kickbacks by buying essentially worthless captive reinsurance that would result in profit for lenders.
In exchange for the alleged kickbacks, which the CFPB said were “common practice in the years leading up to the financial crisis,” the mortgage insurers received business referrals from the lenders.
Under the proposed settlement, the insurers are prohibited from purchasing or obtaining new captive mortgage reinsurance for 10 years. The insurers will also pay $15.4 million in penalties and will be subject to compliance monitoring by the CFPB.